The Last, Last Day to File Taxes

File that Tax Return!

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Weekly Tax Tip

File that Tax Return!
October extension deadline fast approaching

Category:
Miscellaneous

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Monday, October 17th marks the extension deadline for filing your 2015 Form 1040 Tax return. While most taxpayers have this event in the rearview mirror, if you have not filed a tax return, you still have a few weeks to get this done. Think you do not need to file a tax return? Here is a quick checklist of cases when filing one might make sense.

  • You are due a refund. Without filing, the government could end up keeping these funds.
  • You wish to start your audit time clock. Remember the audit time-frame never starts if you do not file your tax return.
  • You are eligible for Health Insurance Premium Credit. Be aware of this possible benefit if you use the market exchange to purchase your health care insurance.
  • You have withholdings, but owe no tax.
  • You are eligible for a refundable credit. This is true with the popular Earned Income Tax Credit, the Additional Child Tax Credit, and a portion of the American Opportunity Tax Credit.
  • Your state requires a federally filed tax return.
  • You want the filed tax return for your records.

Many taxpayers have trouble gathering accurate and complete information necessary to file their tax return. When they cannot get all the necessary information, they get stuck. Should this be your situation, please ask for help. Even a reasonably close tax filing that is later amended when more information becomes available can be a better alternative than not filing at all.

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Published: 09/23/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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WHO WILL GET THE $

Alert: Review Beneficiary Designations

3860 Crenshaw Bl., #217  •  Los Angeles, CA 90008
Phone: 323.292.5407 • Fax: 877.690.7818 • Ontario: 909.428.1151
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Weekly Tax Tip

Alert: Review Beneficiary Designations

Category:
Planning

Planning category image

Sometimes federal tax laws make us lax in reviewing the things that matter. Beneficiary designations is one such example. This is because there is a federal estate tax exemption of $5.45 million for you and an additional $5.45 million for your spouse. This means the likelihood of your death creating an estate tax problem is remote. Correct? Not so fast. Here are reasons an annual beneficiary review is important.

Beneficiary designation can over-ride a will. There is often the false assumption that a written will or divorce decree always over-rides beneficiary designations in other accounts. This is not true. In many cases, the document with the most recent date over-rides older designations. In other cases, even though a divorce decree removes a beneficiary in an account, if it is not also done at the account level the ex-spouse could still receive the funds.

States rules differ. Just because the federal estate exemption is high, it does not mean the state exemption is also high. Many states have lower exemption limits, making a planned beneficiary approach more important for all of us.

The will is still important. Your beneficiary designation review should also include a review of your will. You may wish to add clauses to designate alternative beneficiaries should someone die. The more specific, the more likely your heirs will be able to avoid the time necessary to go through the probate process.

What accounts to check. A review of beneficiary designations should include the following:

  • Insurance policies
  • Annuities
  • 529 college savings plans
  • Bank accounts
  • Investment accounts
  • Pension plans
  • Retirement savings accounts (SEP IRA, Traditional IRA, SIMPLE IRA, Roth IRA, 401(k), 403(b), plus others)
  • Company benefits
  • Will

Your beneficiary designation should be reviewed annually or whenever there is a change in your situation. Typically that occurs with a major life-event such as marriage, divorce, a new birth or death, retirement, or moving. But a review can be required whenever something changes, including your desire to give more (or less) to someone or to add contingencies to your current beneficiary set-up.

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Published: 09/09/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
All rights reserved.

 

OWN A BUSINESS?

Reminder. 3rd Quarter Estimated Tax Payment Due

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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Reminder. 3rd Quarter Estimated Tax Payment Due

Category:
Planning

Planning category image

If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The third quarter due date is now here.

Normal due date: Thursday, September 15th 2016

Remember you are required to withhold at least 90% of your current tax obligation or 100% of last year’s federal tax obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment might be necessary. Here are some other things to consider:

Underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a quick payment at the end of the year may not help avoid the underpayment penalty.

W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.

Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.

Don’t forget state obligations. With the exception of a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments.

* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.

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Published: 09/02/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
All rights reserved.

 

BACK TO SCHOOL

 

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Phone: 323.292.5407 • Fax: 877.690.7818 • Ontario: 909.428.1151 • taxdoc4u@gmail.comwww.taxdoc4u.com

Autumn Edition

Tax Doctor Newsletter

Autumn Edition: September 2016

September 2016

Phone: 323.292.5407

Fax: 877.690.7818

Ontario: 909.428.1151

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  • September 5th:
  • Labor Day
  • September 15th:
  • 3rd Quarter Estimated Tax Due
  • October 1st:
  • SIMPLE IRA plan establishment due

Classrooms are now filling up as our summer days draw to a close. The IRS recently warned incoming students and their parents of a new scam targeting them. A review of this scam is outlined here. Also included is an article with ideas to consider if you want to prepare for a possible early retirement. An article on the disturbing trend of some taxing authorities targeting revenue from people and businesses that have no voting authority rounds out this month’s newsletter.

Should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

In the News: The Student Tax Scam

IMPORTANT: Please pass this information on to each of your children and any family with kids in school. Your best defense is awareness.

With school just around the corner, the IRS has reminded us to pay attention to a new scam that is targeting students and their parents. Here is what you need to know.

Bullet Item 1 The scam. Callers will contact your student and demand payment of an unpaid Student Tax. This tax does not exist. The contact is typically via phone call, but can take the form of a realistic looking email.
Bullet Item 2 It will seem real. The caller will say they are from the IRS. They will have your student’s name and some of their personal information stolen from another source. There may be a caller ID displaying IRS. They will often call multiple times and may even threaten arrest.
Bullet Item 3 Their goal. To get your unwary parent or student to provide them with payment through a prepaid debit card, credit card, or other type of gift card.
The Student Tax Scam
Bullet Item 4 What to do. If this happens to you, hang up. If they call back, do not answer. Students should inform parents of the call. Remember, the IRS NEVER initiates a tax question with a phone call or email. You can also report the scam to the Treasury Inspector General for Tax Administration: IRS Impersonation Scam Reporting Form

Your data must be stolen

Should this scam occur, one thing is certain. Personal data has been stolen. If you receive this scam call, you may be targeted for other scams. So be alert and consider reviewing your credit reports to ensure someone is not trying to access your identity in other ways.

In the News: The Student Tax Scam

In the News: The Student Tax Scam Image

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Tips for Early Retirement

When would you like to retire? Even if the answer is later versus sooner, most of us would like the freedom to decide. To do this, consider what it would take to create financial independence in retirement. Here are some ideas to help plan for an early retirement.

Bullet Item 1 Start early. Establish your desire to retire early as soon as possible. Have a discussion with your spouse and loved ones to ensure you have the same retirement date goal. With this stated goal, meeting savings targets and establishing spending priorities get much easier.
Bullet Item 2 Know what you want to do. Have you always wanted to visit national parks? Do you have a passion for art? If you have a dream that can be fulfilled in retirement, it makes any hardships to get there more tolerable. Once you set retirement goals, creating a plan to get there will have more meaning.
Tips for Early Retirement
Bullet Item 3 Pay yourself first. People who retire early have higher savings rates than most of us. Consider saving in excess of 10% of your earnings. To do this might mean holding off on a big vacation once in a while or delaying a major home improvement or purchase. While a hardship, knowing the long-term dividend makes it worthwhile. The larger your savings become, the more flexible you are in acquiring assets that generate more wealth for you.
Bullet Item 4 No debt and credit cards paid in full. It’s hard to retire early if you are making large loan payments. Having a mindset to save money before you buy something versus taking out loans is the way to go for prospective early retirees. Why pay the credit card company interest when you could use that money during your non-working days?
Bullet Item 5 Financial independence mindset. Save enough to not have to worry about Social Security or other government programs to take care of you. Said another way, never over-spend your own resources as you will need to depend on yourself and not others for your financial independence.
Bullet Item 6 Use common sense when investing. Many investment alternatives may no longer make financial sense when compared to the income potential of the underlying asset or property. For example, if you own rental property, determine if the cash flows create a reasonable rate of return for the price you paid for the property. If you use common sense, more of your investments may help generate income in retirement.
Bullet Item 7 Other resources. Go through a retirement planning process with a qualified expert. This exercise can help you understand what your projected financial needs will be during your retirement years. Project your potential savings. Look into other sources of projected income from pension plans and retirement savings accounts. Create an estimate of possible Social Security benefits. Understand what other resources will be available to you during retirement.

While this list is not meant to be all-inclusive, it should help start the conversation toward your early retirement dream. Remember to ask for help to understand your situation and to develop your own personal plan.

Tips for Early Retirement

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What to Do With Your Social Security Statement

The Social Security Administration is now doing a better job in sending out earnings reports by mailing paper statements to workers every five years beginning at age 25. The reports are also available online. These reports recap historic earnings and contain an estimate of potential benefits.

When you receive your report, spend a few minutes reviewing the statement. Here are some suggestions on how to do this.

Bullet Item 1 Review your earnings history. Towards the back of the report is a recap of your earnings record. This should accurately reflect reported earnings on your tax return. This number is a summary of all your earnings subject to Social Security as reported by your employer on your W-2 forms. But if you are self-employed or have many employers, you must make sure that the income properly reflects what you earned.
Social Security Statement
Action:
Employees: Pull out your W-2s and make sure the totals match
Self-employed: Pull out your tax return and confirm totals match
Review history: Review historic figures as well. Your Social Security benefits use your full work history to calculate future benefits.
Bullet Item 2 Review your potential retirement benefits. The Social Security statement will provide you with an estimate of your benefit amount using current dollars and current work history. The value of your benefit will show three benefit amounts. One for the minimum retirement age of 62, one for the maximum amount if you start your benefits at age 70, and one for your full retirement age between the ages of 65 and 67.

Action: Consider these monthly benefit amounts in terms of your retirement plan to help create a realistic picture of what you will have available to you when you retire.

Bullet Item 3 Note other benefits. Remember, Social Security is not just about your retirement benefits. There are also estimates presented for disability and surviving family benefits. Please review these estimates to understand the potential benefits these programs may provide.
Bullet Item 4 Remember current benefits are just estimates. The benefits noted on this statement are estimates. Actual benefit amounts rise with inflation, change with tax laws, and adjust with your future earnings. Your benefit statement will show you the assumptions used in creating your estimated amounts.

Action: Review the assumptions used by the Social Security Administration. Pay special attention to the future earnings used by them to create the benefit amounts. If you do not think they are accurate, you may need to create revised estimates with more accurate assumptions.

Should you find any errors in the statement correct them immediately. The last page of the statement provides a means for doing this.

What to Do With Your Social Security Statement

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Taxation Without Representation is Alive and Well

Our forefathers launched the Revolutionary War with the claim “taxation without representation.” What few of us realize is that taxing the other guy who has no say in the matter is now a prevalent technique. Here are some examples.

Bullet Item 1 Hotel taxes to fund sports stadiums. New professional sports stadiums across the country are using hotel taxes to fund their construction. This tax is added to every visitors’ bill without input on whether they agree to the tax or not. In perhaps the most brazen example, supporters of a potential new NFL stadium referendum in San Diego are promoting getting fans from competing football teams to pay for their new stadium through hotel taxes.
Bullet Item 2 High property tax on vacation property. Own a cabin or other vacation property? The property tax you pay for this property is set by local officials. Temporary residents do not have a vote in electing these people. So out-of-town cabin owners end up footing the bill for local initiatives without a vote.
Taxation Without Representation is Alive and Well
Bullet Item 3 Small business taxes. While the legal system treats corporations as legal entities, they have no voting rights. In addition, millions of small businesses are taxed on individual tax returns as flow-through entities, but the owners have no voting authority to represent their business if they do not live in the same community as their business. This means things like property taxes and sales taxes are set without representation.
Bullet Item 4 Out-of-state taxes despite no physical presence. Many states are taxing non-resident individuals and businesses with new legislation. For example, a consultant working for a California company may be subject to California income tax, even if residing and working in another state. Out-of-state businesses are challenged with newly defined “nexus” rules. As non-residents, these new taxpayers have no voice in the matter.

What’s the big deal?

Unfortunately, the pace of targeting taxes towards people and businesses with no voting rights is increasing. This is often due to legislatures taking the path of least resistance. Why not place the tax burden on someone who does not vote? Here are some suggestions on what you can do to manage this problem for you.

Bullet Item 1 Manage your stay. Know which cities have hotel taxes to support construction projects. Vote with your wallet by selecting your location for business and vacation stays. Sometimes the tax only applies to select counties around a stadium. This is the case with the tax to fund the construction of the Minnesota Twins baseball stadium. So select a nearby county that does not collect the tax.
Bullet Item 2 Shop wisely. When looking for a new vacation home or cottage, pay attention to the property tax. There are cases where two similarly valued properties on the same lake have different property taxes because the lake is in two different communities.
Bullet Item 3 Squeak. While you have no vote, you can still try to apply influence. If a community is not business-friendly in their tax proposals, getting the word out is often your only approach. Visit city council meetings and voice your concerns. Support local candidates that understand your plight. Consider challenging property valuations to minimize the impact of tax increases.

Every state, county, and community is different. Know the tax climate before you buy, move, or work in a community that is not your primary residence. It is often your only defense when you are subject to taxation without representation.

Taxation Without Representation is Alive and Well

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As always, should you have any questions or concerns regarding your situation please feel free to call.

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WHAT’S YOUR NAME?

Avoid Name Mismatch Audits

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
www.taxdoc4u.com |  taxdoc4u@gmail.com
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Avoid Name Mismatch Audits

Category:
The Audit

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If you were married, divorced, or changed your name for any reason during the past year, do not forget to file to change your name prior to preparing your 2016 tax return. The IRS automatically conducts a name match on the first few letters of your last name. If the name on your tax return does not match the name on file at the Social Security Administration for your Social Security number, here’s what could happen;

  • You are unable to e-file your tax return
  • The IRS automatically accepts your income as taxable, but then disallows any deductions.
  • You may receive a notice from the IRS with taxes owed and underpayment penalties.

Here’s what you can do.

  • Prior to filing your tax return, go to www.ssa.gov and download form SS-5. Fill the form with the name change and file it as soon as possible.
  • Also notify your employer. Double check the W-2 you receive to ensure the change was made correctly. If the change is made on your W-2, you must make sure it is changed at Social Security.
  • If you are planning a major financial transaction in the near future you may wish to adjust the timing of the transaction or the timing of your name change to avoid complications.
  • Don’t forget to also change your name on other important documents like auto titles, drivers license, property titles, bank accounts, loan agreements, beneficiary documents and other accounts.

If you are unable to make the name change in a timely manner, use the name on file at the Social Security Administration AND with your employer when filing your taxes to avoid the automatic notification of a name mismatch.

Here is a link to the Social Security web site that walks through their name change process. Please be forewarned, this process is not as simple as it was in the past. You now need to provide proof of citizenship and submit documents that show the original and new names. Spend some time going over the name change process and plan accordingly.

Social Security Name Change Process

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Published: 08/26/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
All rights reserved.

 

ASK QUESTIONS BEFORE, NOT AFTER

When to Ask for Help

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
www.taxdoc4u.com |  taxdoc4u@gmail.com
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When to Ask for Help
OR run the risk of a high tax bill

Category:
Planning

Planning category image

“Before taking action talk to your tax adviser.”

How many times have you seen this legal disclaimer and have your eyes gloss over? Unfortunately, there are too many times when taxpayers do not follow this advice and then must pay the price with an unnecessarily high tax bill.

Here are some of the most common situations that can save you money by seeking advice before you act.

  • Getting married
  • Selling a home
  • Donating stocks and investments
  • Getting divorced
  • Change in dependent status
  • Approaching retirement
  • Starting a business
  • Managing participation in tax-advantaged retirement accounts like 401(k), 403(b), and various IRAs
  • Death and birth of loved ones
  • Donating high value items
  • Selling stocks, bonds, mutual funds or business property (rentals)
  • An audit
  • Tax efficient transfer of your estate
  • Selling or buying high value assets (art, collectibles, real estate, and small business assets)
  • Determining Social Security benefit strategy

In advance of any of these events, or when in doubt, please ask for assistance. There are too many stories that include the words “if only he had talked to someone first.”

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Published: 08/19/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
All rights reserved.